Posts Tagged ‘Social Security’

I have to give Donald Trump and Steve Bannon credit. Their administration is unpopular, most of the leaders of their own party distrust them, yet they are moving forward as if they had won a landslide victory.

I have to go back to Lyndon Johnson before I can find any Democratic President who has acted so decisively on taking office.

This is part of a pattern. Richard Nixon, Ronald Reagan and even George W. Bush were transformative Presidents. Jimmy Carter, Bill Clinton and Barack Obama were not. What Clinton and Obama basically did was to normalize the changes that Reagan and G.W. Bush brought about.

Michael Kinnucan, writing in Current Affairs magazine, said the difference between the two parties is that the Democratic leaders always try to position themselves in the moderate center, while the Republican leaders continually redefine where the center is—

Ending Medicaid isn’t an obvious or an easy fight—it’s a very efficient program that’s been part of the American social fabric for 50 years, a program with 70 million beneficiary-constituents, one vital to the survival (economic and otherwise) of some of the most photogenically unfortunate people in America (families raising kids with major disabilities, for chrissake!) and a major source of business for the gigantic and very widely geographically distributed healthcare-provision industry. It’s also very popular; only 13% of Americans support slashing Medicaid. And no wonder: 63% of Americans say that either they or a close friend or family member has been covered by Medicaid at some point. It’s not even arguably in any kind of crisis; there’s no obvious reason to touch it.

So for Republicans, going after Medicaid is picking a big fight, one they could easily dodge. But that won’t stop them. They know that destroying this kind of program is key to their vision for America, both ideologically and in terms of budget math. They’ve known it for years, and they’ve been releasing plans and focus-grouping and developing consensus for years in the wilderness, and now they’re tanned, rested and ready.

And for 95% of their congressfolks it’s not even a question—they’ll vote yes. They’ll do it in the smartest possible way, too: they’ll say there’s a fiscal crisis and it’s necessary, they’ll say it’s not a cut it’s just market efficiency, they’ll use block-granting to disown the cuts that happen and lay them on the states, and then wait till the cuts reduce the program’s popularity to mop up what’s left. Most Americans won’t really believe anyone would do what the GOP is about to do until it’s too late.

And hey, maybe they’ll even lose a couple of Congressional races over it, but the Dems won’t be in a strong enough position to reverse the cuts for years and years, and starting a program like this is much harder than ending it. Once it’s gone, it’s gone.

They are using Social Security as a wedge issue to divide the old from the young. But in fact, the longer us old-timers are forced to work, the fewer jobs there are for young workers and the less opportunity for young workers to rise.

As Bernie Sanders has pointed out, the Social Security trust fund, which is invested in interest-bearing Treasury bonds, is sufficient to ensure that full benefits will be paid for many years to come, and full benefits can be continued indefinitely by raising the income ceiling on Social Security taxes.

Until recently, there was a bipartisan consensus on reducing Social Security benefits. Benefits are already being cut by means of a law now in effect that gradually raises the age for full benefits from 65 to 67 (it’s now 66).

President Obama’s budgets called for calculating Social Security cost-of-living increases by means of something called the Chained CPI, which discounts actual price increases when meaning inflation.

He dropped the idea when he proposed the current 2015 budget after opposition from liberal Democrats such as Elizabeth Warren.

Hillary Clinton said she is opposed to plans to privatize or “undermine” Social Security. So far as I know, she hasn’t said anything more specific. Two other Democratic candidates—Bernie Sanders and Martin O’Malley—think Social Security benefits should be increased. I agree with Sanders and O’Malley.

I say—hooray for partisanship. It is better than bipartisan agreement on bad ideas.

Paul Krugman, whom I respect, thinks that Americans will have a real choice in 2016 between the Republicans, who represent the wealthy, and the Democrats, who represent the public interest.

I think he’s right about the Republicans, but I’m not so sure about the Democrats. Here’s what he wrote:

Paul Krugman

As we head into 2016, each party is quite unified on major policy issues — and these unified positions are very far from each other.

The huge, substantive gulf between the parties will be reflected in the policy positions of whomever they nominate, and will almost surely be reflected in the actual policies adopted by whoever wins.

For example, any Democrat would, if elected, seek to maintain the basic U.S. social insurance programs — Social Security, Medicare, and Medicaid — in essentially their current form, while also preserving and extending the Affordable Care Act.

Any Republican would seek to destroy Obamacare, make deep cuts in Medicaid, and probably try to convert Medicare into a voucher system.

President Obama has pushed for new trade treaties that give foreign corporations the right to appeal for damages if countries pass laws that unjustly deprive them of profits. Similar provisions in existing trade treaties have been used against environmental regulation, subsidies for renewable energy and financial regulation. Proposed new treaties are believed to go further.

The proposed Trans Pacific Partnership agreement appears doomed, but the Trans Atlantic Free Trade Agreement (aka the Transatlantic Trade and Investment Partnership) and the Trade in Services Agreement might sneak in under the public’s radar. Corporate American favors these treaties, so the GOP might go for them.

President Obama repeatedly proposed changing the formula for Social Security benefits and raising the age for Medicare, in exchange for modest tax increases on upper income brackets. Even though the tax increases are off the table, Republicans might go for such a “grand bargain” on other issues.

If President Obama discovers some new threat that he says requires military intervention in a foreign country, the Republicans in Congress are sure to support him—short of actually voting authorization, which he says he doesn’t need anyway. Likewise for new authority for surveillance, preventive detention, drone strikes, prosecution of whistle-blowers, etc.

The Canadian government and Trans Canada corporation want to bring corrosive tar sands bitumen from northern Alberta to oil refineries in the United States. Republicans in Congress are strongly in favor of this. President Obama’s stand on the Keystone XL pipeline is uncertain, but federal regulators have already quietly approved the alternative Alberta Clipper pipeline. Overall the President is a strong promoter of energy development, including hydraulic fracturing for natural gas.

President Obama says that he wants laws and regulations that limit the greenhouse gas emissions that contribute to global warming. A larger segment of the Republicans deny that human-caused climate change is even taking place, let alone that something should be done about it.

The only feasible immigration reform, as I see it, is some provision providing a path to citizenship for the millions of unauthorized immigrants already in this country. I admit this is not good, but the alternatives are worse.

I started reading Paul Krugman’s column in the New York Times during the Bush-Cheney administration, and quickly came to respect him for his incisive and fearless criticism of the administration’s policies. He didn’t have any insider knowledge—just a willingness to look at the facts and state the obvious.

I don’t read his column regularly any more—partly because the New York Times has gone behind a pay wall and I’m not a subscriber.

Paul Krugman

Recently he wrote a long article entitled In Defense of Obama for Rolling Stone magazine, which, to me, is an example of how progressives have come to think of peace and prosperity as unattainable ideals.

I think it is worth discussing in some detail, but I first want to mention the way Krugman framed his argument. He wrote that “the left” did not get all it wanted, like somebody going to a restaurant and not finding everything they like on the menu.

For me, it is not a question of the degree to which you satisfy the desires of “the left” and “the right”. It is a question of whether the USA can halt its descent into authoritarianism, militarism and oligarchy before it is too late. Obama, in my opinion, has not done this. In my opinion, he has not even tried.

I know this language sounds exaggerated. I don’t think it is and, if you follow this web log, you will see the reasons why I think so.

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Now, Krugman on health insurance reform and the Affordable Care Act.

We won’t have the full data on 2014 until next year’s census report, but multiple independent surveys show a sharp drop in the number of Americans without health insurance, probably around 10 million, a number certain to grow greatly over the next two years as more people realize that the program is available and penalties for failure to sign up increase.

It’s true that the Affordable Care Act will still leave millions of people in America uninsured. For one thing, it was never intended to cover undocumented immigrants, who are counted in standard measures of the uninsured. Furthermore, millions of low-income Americans will slip into the loophole [Chief Justice John] Roberts created: They were supposed to be covered by a federally funded expansion of Medicaid, but some states are blocking that expansion out of sheer spite.

Finally, unlike Social Security and Medicare, for which almost everyone is automatically eligible, Obamacare requires beneficiaries to prove their eligibility for Medicaid or choose and then pay for a subsidized private plan. Inevitably, some people will fall through the cracks.

Still, Obamacare means a huge improvement in the quality of life for tens of millions of Americans – not just better care, but greater financial security. And even those who were already insured have gained both security and freedom, because they now have a guarantee of coverage if they lose or change jobs.

What about the costs? Here, too, the news is better than anyone expected. In 2014, premiums on the insurance policies offered through the Obamacare exchanges were well below those originally projected by the Congressional Budget Office, and the available data indicates a mix of modest increases and actual reductions for 2015 – which is very good in a sector where premiums normally increase five percent or more each year. More broadly, overall health spending has slowed substantially, with the cost-control features of the ACA probably deserving some of the credit. [snip]

Senator Elizabeth Warren is not as hard on President Obama as this headline would indicate. And she is right to say that we the people can’t expect a President to change the nation for the better all by himself. Change requires a strong political movement, operating at all levels of government, with the power to reward its friends and defeat its enemies.

Democratic Senator Mark Begich of Alaska, campaigning for re-election, advocates expansion of Social Security. It is the most popular of the New Deal programs. Why do so many Democrats, including President Obama, want to undermine it?

The voters’ Presidential primaries are more than a year away. But the big money primaries have already begun. Some rich donors are on the side of working people, but working people shouldn’t count on rich people to represent their interests.

The main thing that is keeping Democrats in office is the policies and tactics of Republicans. The GOP is permanently alienating minorities and young people by trying to discourage them from voting. Which means the Democrats don’t have to do much to benefit minorities and youth to get their votes.

Amid heightened nationalist passions over the Ukraine crisis, President Vladimir Putin is cracking down on independent journalists and opposition politicians.

The United Nations estimates that 40,000 Russians asked for political asylum in other countries last year, the highest number from any country except Syria. This year Russian requests for asylum are running ahead of last year’s.

President Putin agreed to cancel Cuba’s debt to the old Soviet Union, while Cuba plans more offshore oil concessions for Russian companies. The USA could have had equivalent deals any time during the past 50 years if not for the ongoing U.S. embargo against Cuba.

Obama roots for the good cause but often ends up endorsing the acceptable evil on which the political class or the satisfied classes in society have agreed. He watches the world as its most important spectator.

This is an excellent account not only of President Obama’s second term, but the current American political scene. Strongly recommended.

The philosopher Hannah Arendt wrote that one of the defining characteristics of a totalitarian government is that it has secret laws. The Obama administration claims authority to wage war and issue death warrants based on secret legal rulings.

The American Civil Liberties Union and the New York Times forced the administration to release the 41-page legal memo that justified the killing of Anwar al-Alwiki, an anti-American U.S. citizen, in Yemen. The first 11 pages, listing what al-Alwiki was accused of doing, are blacked out, all the footnotes are blacked out, and many other references throughout the memo also are blacked out.

What this indicates is that there are other secret legal memos claiming who-knows-what powers for the President. The administration’s lawyers decide what powers President Obama has, and the rest of us are not allowed to know, let alone dispute, what these powers are.

International cooperation between secret intelligence agencies puts them beyond the reach of their national governments. It may be illegal for the National Security Agency to spy on Americans and General Communications Headquarters to spy on Britons, but there is nothing to prevent the NSA from spying on Britons and the GCHQ from spying on Americans, and passing the information along.

Social Security offices, like post offices, are located on prime real estate. There are big profits to be made by someone if this real estate is sold off at bargain prices. And also profits to be made in replacing civil servants with contractual on-line services.

I have no way of knowing whether this is what the Social Security administration has in mind, but I do know that shutting down offices will in no way benefit senior citizens.

I like the Internet. The power to go on-line has enriched my life in so many ways that I feel at a loss when Internet service temporarily shuts down. What I dislike is the attempt to shut down alternatives to the Internet, which is becoming more and more common in American life.

Wait times on customer-service phone lines have been made so long that you are virtually forced to go on-line. Book distributors are pushing to replace physical books with Kindle and Nook. There are even people who seriously propose to get rid of currency and coins, and require all financial transactions be conducted through credit cards, debit cards or otherwise on-line.

The latest example is the Social Security Administration. Its Vision 2025 plan is to close most of its 1,200 field offices, allow its work force to shrink by 30,000 through attribution and serve clients through “on-line service delivery” rather than face-to-face contacts with human beings.

This follows a widespread business and government model of achieving cost savings and administrative convenience by degrading the quality of service.

People who depend on Social Security for their income probably can’t afford Internet connections, and many people of the Social Security generation aren’t at home with computers. When I signed up for Social Security nearly 16 years ago, I was pleased at the helpfulness of the woman I talked to. I would not have wanted to try to communicate with a software algorithm.

The Obama administration apparently is willing to adopt, or at least tolerate, a policy that is bad for two core Democratic constituencies, senior citizens and union workers, and benefits nobody except the high tech companies that will get the contracts to provide this service.

I predict that if this policy is adopted, it will be used by opponents to Social Security as evidence that government can’t work, and that Social Security should be privatized.

The U.S. Social Security Administration, criticized for seizing tax refund checks without notice based on debts of the taxpayers’ deceased parents, said it will stop trying to collect debts more than 10 years old.

That’s good first step. How about promising to use due process of law before trying to collect any debts? And how about observing the legal principle that children are not responsible for the debts of their parents?

The U.S. Treasury and Social Security Departments are intercepting federal and state tax refunds because of alleged overpayments to taxpayers’ parents decades ago. The theory is that the children benefited from the overpayments, so they owe the money.

The intercepts mostly come without warning, and without the government providing any documentation that the money actually is owed. The first warning the taxpayer gets that there is a problem is when the tax refund check is intercepted.

Be that as it may, there is nothing in the law that requires or authorizes Treasury or Social Security to ignore due process of law. This is the decision of some unknown, unaccountable person hidden deep within the bureaucracy.

At the very least, taxpayers should be notified in advance as to just what the supposed overpayment was, and when and how it was made, and be given a chance to make an objection.

Experience tells me that unelected people in positions of authority in government seldom back down from mistakes. But since nobody in Congress stands behind the original enabling legislation, there should be no problem in repealing it. Should there?

The government is following the worst practices of mortgage foreclosure servicers and bill collection agencies, in acting without warning and with lack of documentation and due diligence to make sure they’ve got the right person and the debt is really owed.

The U.S. Social Security Administration, criticized for seizing tax refund checks without notice based on debts of the taxpayers’ deceased parents, said it will stop trying to collect debts more than 10 years old.

That’s good first step. How about promising to use due process of law before trying to collect any debts? And how about observing the legal principle that children are not responsible for the debts of their parents?

Liberals in Washington can’t win for losing. While President Obama and the congressional Democrats did stand firm against the blackmail threat of a government shutdown and debt default, merely keeping the government functioning is not a great triumph. While the Democrats control the White House and the Senate and the Republicans only control the House of Representatives, it is the Democrats who act as if they are a defeated minority.

The writer mocked the “fever dream bizzaro world” of a conference convened last Thursday by the Center for American Progress, a liberal think tank. Among the “irrelevant pipe dreams” were a higher minimum wage, investing more money in education, infrastructure and scientific research and doing something about climate change. She did not advance any arguments as to why these are bad ideas. She merely took for granted that they are politically unrealistic.

Maybe they are. The default baseline position is the budget sequester, which locks in reductions in government spending across the board, which means less for scientific research, less for repairs of roads and bridges, less for school lunches and food stamps. It’s hard to see how the Democrats can get out of this without giving up even more on historic liberal programs, such as Social Security and Medicare.

And they may not see this as a dilemma. President Obama has long hinted at his willingness to cut Social Security and Medicare. This may have been a factor in the Republican resurgence in 2010.

President Obama’s top economic adviser appears to think that the economic recovery depends on restoring business “confidence” and confidence can be restored only by cutting social safety net programs. And a significant number of Democrats in the Senate are willing to go along with this.

So the Democratic program consists of Obamacare, reductions in other social programs and a moderate increase in taxes for rich people. I think most voters are looking for a program that will address falling wages and long-term unemployment, even though that may seem like an “irrelevant pipe dream” to Washington insiders.

President Obama early in his term of office told a group of Wall Street bankers that he was the only one standing between them and the people with pitchforks. I think it is time to join the people with pitchforks.

There is a deeply entrenched financial and corporate oligarchy who for the most part do contribute anything anywhere near equal to what they take, whose interests do not coincide with the public interest and who do not feel any responsibility for the common good. It is time to break their lock on government and end their special privileges.

The Chained CPI proposed by President Obama would limit increases in Social Security, disability and veterans benefits on the grounds that recipients could offset increases in prices by lowering their standard of living. That is the definition of the Chained CPI. It is a CPI that will not keep up with the increases in prices measured by the standard Consumer Price Index. Since income tax rates also are tied to the Consumer Price Index, switching to the Chained CPI would also be a middle-class tax cut.

Note also that Social Security benefits are linked to lifetime earnings, which for most citizens are not keeping up with inflation, so future retirees are going to have a tougher time even if the President does nothing.

Obama said his purpose is to induce Republicans in Congress to accept his budget and tax proposals, but the Republican leadership has not asked for this and is likely to use this as a political weapon against Obama and the Democrats. It would be an effective weapon for the GOP. Why, then, does the President want to cut Social Security? Why is so much of the Washington establishment in favor of it?

While I can’t read their minds, I can think of two reasons why they might. One reason is political and the other financial.

The political reason is that so long as Treasury bonds are held by the Social Security trust fund, that portion of the national debt is off-budget. The federal government owes about $16 trillion to holders of Treasury bonds, but the $2.5 trillion held by the Social Security trust fund and $4 trillion held by other government trust funds are off-budget.

As soon as the Social Security Administration starts to sell those bonds to private investors, the national debt will appear to increase, even though the only thing that changes is that the debt is held by private citizens instead of for the benefit of American senior citizens.

Recall that Social Security taxes were increased and the full-benefits retirement age raised for 65 to 67 back in 1983 to create a surplus, which is intended the retirement benefits of the baby boom generation were covered. That surplus was invested in Treasury bonds. While the Social Security administration is paying out more in benefits than it is collecting in taxes, it still is accruing interest on its Treasury bonds. But it will soon have to start cashing in those bonds in order to cover its obligations.

The economic reason that financiers might object to this is that putting Treasury bonds on the market will decrease the price of bonds, which is the same as increasing the interest on bonds. Many other interest rates are pegged to the interest rate on U.S. government bonds, so, all other things being equal, this would mean an overall increase in interest rates. An increase in interest rates makes bonds a better investment compared to stocks. In other words, drawing down the Social Security trust fund would tend to depress the stock market.

I don’t think the effect would be trivial. One of the things that has generated the current stock market boom is that most savers can’t earn interest on their bank accounts or money market funds. Investors are forced to take a risk if they want to increase their holdings

I have two moderate suggestions:

Have the Federal Reserve System create money to buy Treasury bonds from the Social Security trust fund, just as it is now creating money to buy “toxic assets” from the big Wall Street banks. The Fed could hold or extinguish the bonds, so the financial markets would be unaffected and the national debt would actually be lowered.

Index the cap on income subject to Social Security taxes to the Consumer Price Index to keep Social Security solvent for the long-term future.

Recently the Institute for Policy Studies ran a comparison of how proposed reductions in Social Security benefits—raising the retirement age, and lowering cost of living adjustments by means of the Chained CPI—would affect a home health aide, 51-year-old Rhonda Straw, and corporate CEOs Stephen Hemsley of UnitedHealth Group, the largest U.S. health insurer, and Larry Merlo of CVS Caremark, the largest U.S. drug retailer.

Sometime within the next couple of decades, barring surprises, the Social Security trust fund will be exhausted. That doesn’t mean there will be no money to pay Social Security benefits. It means that the accumulated surplus funds earmarked to pay for the Baby Boom generation’s retirement will be exhausted, and payroll taxes won’t be enough to cover full benefits.

One way to deal with this is to raise the cap on payroll taxes, as proposed by Senator Bernie Sanders, an independent from Vermont. Neither President Obama nor the Democratic and Republican leadership in Congress is considering this. Instead, their method of heading off a future reduction in benefits is a present reduction in benefits, either through raising the retirement age or reducing cost-of-living increases by calculating them with the Chained CPI.

The battle now going on in Washington over taxes and entitlements is a fixed fight. Democratic and Republic leaders now agree that crucial safety net programs such as Social Security and Medicare would be cut. The only question is whether reductions in entitlements will be accompanied by moderate tax increases on the upper-income brackets, as the Democrats propose, or not, as the Republicans insists.

I blame President Barack Obama more than I blame right-wing Republicans such as Rep. Paul Ryan. It is obvious what Ryan’s objective is—to destroy the social safety net, minimize taxes on rich people and give free rein to corporations. And his supporters are in full agreement with his objective.

Obama’s actions are the opposite of his rhetoric, and, unlike with Ryan, the opposite of what his core supporters want. I oppose the whole right-wing corporatist coalition—Ryan, Scott Walker the Koch brothers, the American Legislative Exchange Council and all the rest. But I feel betrayed by Obama.

When it comes to the Bill of Rights, President Obama lacks the courage to do what’s right in the face of public opinion. But when it comes to going against the economic interests of his core supporters, he does possess the courage, as well as the political skill, to enact unpopular policies that are deeply wrong.

I forget who said that if Barack Obama is a liberal, he is an idiot, but that if he is a conservative, he is a genius. I think he’s a genius. Who else could have created a situation in which Democrats regard attacks on Social Security and Medicare as the moderate liberal position?

Thomas B. Edsall wrote a good article in the New York Times earlier this weekmonth about how the consensus of the Washington elite goes against the views of the majority of American voters.

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Public opinion polls indicate that most Americans want to protect the social safety net by, if necessary, raising taxes on rich people, while the Washington consensus, including both Democrats and Republicans, is that taxes should be kept low and the social safety net should be reduced.

Social Security and Medicare policy are a good example.

Cutting benefits is frequently discussed in the halls of Congress, in research institutes and by analysts and columnists. The idea of subjecting earned income over $113,700 to the Social Security payroll tax and making the Medicare tax more progressive – steps that would affect only the relatively affluent — is largely missing from the policy conversation.

The Washington cognoscenti are more inclined to discuss two main approaches that are far less costly for the affluent: means-testing of benefits and raising the age of eligibility for Social Security and Medicare. Sidenote: policy makers and national journalists who weigh in on this issue generally earn more than $113,700 a year.

Raising the age of eligibility for Social Security is a bad idea. It means a net cut in Social Security benefits. It especially hurts poor people because they don’t live as long, on average, as rich people. In today’s USA, if you’re laid off from work in your 50s, it is going to be exceedingly difficult to get a new job that pays a middle-class salary.

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Means-testing Social Security—that is, denying Social Security benefits to people who are well off—is a bad idea. It would penalize people for saving and trying to provide for themselves, which would be bad in itself and also provide ammunition for those who want to get rid of Social Security altogether.

Another popular proposal is the tinker with the cost-of-living adjustment by tying it to something called the Chained Consumer Price Index, which would rise more slowly than actual prices. As I argued in a previous post, this would be a stealth cut in Social Security benefits and all other programs that are tied to the existing CPI.

Edsall said that raising the cap on income subject to Social Security taxes would solve the problem. With an increase in payroll taxes amounting to 0.6 of a percentage point of Gross Domestic Product, the Congressional Budget Office projects that the Social Security trust fund would be in surplus for 75 years. Federal taxes in 2009, 2010 and 2011 were 15.1, 15.1 and 15.4 percent of GDP, which is the lowest since 1950, Edsall said. While this is off the table for discussion in Washington, public opinion polls indicate that this is the solution favored by a majority of the American public.

Elite anxiety over entitlement-driven budget deficits and accumulating national debt has created a powerful class in the nation’s capital. The agenda of this class is in many respects on a collision course with mounting demands for action by those lower down the ladder to address the threat to government social insurance programs. Intransigent opposition by the better off and their representatives to raising the necessary revenue means that not only Social Security and Medicare face a budgetary ax.

Among the additional likely casualties: WIC, which provides free nutrition for women, infants and children; long-term and emergency unemployment compensation benefits; low-income housing vouchers; vaccines for poor children; schooling for children with disabilities; special education; preschool programs; child care for disadvantaged and vulnerable children; after-school programs; treatment of the mentally ill; and meals for sick and homebound seniors.

This conflict could not have come at a more difficult time: the United States is in the midst of a zero sum struggle requiring politicians to pick losers, not winners. The population of those over 65 is set to multiply, with longevity steadily increasing even as median annual household income for the population at large has shrunk to $51,584 in January 2013 from $54,000 in 2008.

In this kind of conflict over limited goods, one of the most valuable resources that can get lost in the fray is the wisdom of the electorate at large. In this case, the electorate is pointing toward progressive tax increases for those closer to the top far more readily than members of the political class, for whom high-earners are a crucial source of campaign contributions.

Edsall wrote a book published last year called The Age of Austerity: How Scarcity Will Reshape American Politics. I have skimmed it but not studied it, but I can say that his general assumption is that the age of shared prosperity is over, and that no group of Americans can now gain except at the expense of someone else. The rich are going to cling to their riches, we senior citizens are going to cling to Social Security and Medicare, nobody else is going to give up anything either, and American politics is going to be increasingly bitter.

It’s very true that many social and economic problems would go away, or become a lot easier to deal with, if we had a full-employment, high-wage economy as in the 1950s and 1960s. Our political debate would be over who is going to gain the most rather than who is going to have to sacrifice the most. Edsall doesn’t think these days are coming back. He is an astute observer and he could be right.

President Obama is trying to sell a truly bad idea—a stealth plan for cutting Social Security and other social safety net programs by changing the means of calculating cost of living adjustments. Instead of using the present Consumer Price Index, which is based on the prices of a market basket of goods, the President proposes to use switch to a “Chained CPI,” which goes up at a slower rate than actual prices.

This would affect not only Social Security, but veterans’ benefits, disability benefits and any other government program that is linked to the Consumer Price Index. It is a stealth increase in taxes, because income tax brackets are now indexed to the CPI so that taxpayers aren’t moved into higher brackets by means of inflation. The taxpayers whose taxes would increase are those in the middle tax brackets, not those already in the highest brackets.

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Supposedly elderly Americans rely on three “legs” for their retirement income—savings, company pensions and Social Security. I’m one of the fortunate few who actually has all three “legs”. But most elderly American are down to just one “leg” and would be badly hurt by any cuts to Social Security.

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The above chart shows the dependence on Social Security of the various income groups. The first quintile is the bottom 20 percent of elderly Americans in income, and the fifth quintile is the top 20 percent in income. The chart above shows that the first three quintiles—60 percent of American senior citizens—get the vast majority of their income from Social Security, and the next quintile gets half. The chart below gives a different breakdown.

Cost of living increases would be three-tenths of a percentage point less under the Chained CPI system that they are now. That doesn’t seem like much, but the cumulative effect would be sizeable.

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The existing CPI probably understates rather than overstates the rise in the cost of living for senior citizens. We spend a larger fraction of our income than average Americans on medical care and housing, whose cost is rising faster than the cost of food, transportation and communication. Some economists propose a CPI-E which would reflect senior citizens’ actual medical and housing costs.

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The great harm that Barack Obama has done as President has been to persuade Democrats to go along with anti-liberal policies out of loyalty and the perception that it is enough that he is not a Republican. During the Bush administration, then House Speaker Nancy Pelosi blocked proposals by President Bush that would have undermined Social Security. Now she is a proponent of the Chained CPI.

I don’t know the President’s motives in taking the stand he does. I suspect that he simply accepts the consensus among the Washington elite that Social Security, Medicare and other elements of the social safety net need to be reduced, and that the most important objective for government is to eliminate the federal budget deficit. My guess is that, in working against the interests and wishes of his core supporters, he thinks of himself as a great statesman, like President Nixon going to China.

Click on Numbers Racketfor a 2008 article by Kevin Phillips on the history of changes in the CPI. I doubt if you will be surprised to learn that each change in the CPI calculation made the rise in the cost of living seem less than it was before.

A blogger in New York state’s North Country says she’s going to vote for Barack Obama in order to ensure than Social Security and Medicare are here for her children and grandchildren.

Once upon a time I cast a vote that I later deeply regretted. I was a member of a labor union, and I voted for a contract that preserved my benefits, but reduced them for people who would be hired in the future. Upon reflection, that vote left a bitter taste in my mouth. I vowed to never again cast a vote that would preserve privileges for myself, and deny them to others.

This election is another occasion when I’m being offered that choice.

Over and over, Romney, Ryan and their surrogates say that if you are 55 years or older, your Social Security and Medicare benefits will not change under the Ryan budget, which Romney has pledged to sign into law. That’s not good enough for me.

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Obama’s public stance on Social Security is that he “believes that no current beneficiaries should see their basic benefits reduced and he will not accept an approach that slashes benefits for future generations.” I’ve read many articles over the years that point out that the fix for Social Security is a small one: lift the income ceiling for the payroll tax that funds the program so that wealthier people pay more into the system. If that seems unfair to those wealthier people, I answer that it means that their rate of return drops, but that they benefit – we all benefit – when our elderly are not poor. An economic analysis done by Gary Engelhardt and Jonathan Gruber in 2004 states that the poverty rate among the elderly declined from 35 percent in 1960 to 10 percent in 1995, and concludes that this reduction in poverty can be explained by increases in Social Security support.

I don’t think of Social Security as a retirement investment. I think of it as an insurance program that we all pay in to so that our parents will have greater financial stability in old age, and so that we ourselves will have greater financial stability when we get old. I want my kids and grandkids (and YOUR kids and grandkids) to also be part of the program.

The fix for Medicare is tougher, with the poorly funded addition of prescription drug coverage in 2006 not helping the financial situation. Healthcare costs are tough to handle at all levels right now, whether you are poor on Medicaid, receiving Medicare, have private insurance (as I do), or are uninsured. Obamacare actually helps Medicare, extending the period of time until costs exceed revenues. I know that a fix is needed, but I won’t sign on to one with my vote that will greatly increase health insurance costs for my kids and grandkids while preserving my benefits.

What it comes down to for me: If we decide as a nation that we can no longer afford to take care of our elderly as we are doing now, then a scaling back of benefits should happen now, for everyone. Our young people by and large are not any more able to put money aside for their retirement and future healthcare costs than my generation was, so why should we be sheltered while they take the brunt of both paying for my benefits and then not getting similar benefits when they retire?

I’m voting for the team that seems to want to at least try to solve the problems so that we don’t rob a basic level of security from our kids and grandkids. The future generations who will be affected by a downgrade of Social Security and Medicare are not way off in the foggy future. They will be sitting around the table at this year’s holiday dinners with us.

I think scifiknitter is dead right about the importance of defending Social Security and Medicare from Mitt Romney and Paul Ryan. But I don’t share her confidence that Barack Obama can be counted on to defend these vital programs for the next generation.

The President time and time again has expressed a willingness to cut Social Security, Medicare and other social programs in return for a return to Clinton-era tax rates on Americans in the upper income brackets. He packed the Simpson-Bowles deficit reduction commission with advocates of cutting back on Social Security. This is not something he was forced to do. He could have achieved his tax goals simply by allowing the Bush era tax cuts to expire.

President Obama had not made Social Security and Medicare a central issue in the campaign. In the debates, he told Governor Romney that he thought the two of them largely agreed about Social Security, and that he was open to the same kind of fixes that were made under President Reagan. Those fixes entailed increasing payroll taxes and raising the Social Security retirement age.

The President says he will not accept reductions in “basic” benefits for current recipients or “slashes” in benefits for future generations. He doesn’t define “basic” or “slashes,” so if you read his statement as a lawyer would, you see he gives himself a great deal of leeway.

I think that President Obama’s goal is a grand bargain with the Republican leadership to balance the federal budget by means of moderate tax increases with cutbacks in government spending, including entitlement programs. He has expressed a willingness to make more cutbacks in social programs than rich people would pay in increased taxes. I don’t know what is in his mind, but my guess is that he accepts the elite consensus of opinion and sincerely believes that cutbacks in social programs are necessary.

Mitt Romney’s selection of Rep. Paul Ryan of Wisconsin as his running mate is a bad thing. Ryan, the chair of the House Budget Committee, is a radical right-winger who has proposed privatizing Social Security and wants to replace Medicare with an inadequate voucher program. His budget proposals would entail not only eliminating most of the social safety net, but most governmental services. He proposes drastic tax reductions for rich people, while increasing taxes for working people.

It would be a disaster for the country if Mitt Romney were to be elected, and then die in office, making Ryan President. Or if Romney were to follow Ryan’s lead in domestic policy, as President George W. Bush followed Vice President Richard Cheney’s lead in national security affairs during his first six years in office.

But even if Romney loses, the Ryan choice changes the terms of debate. President Barack Obama has offered to cut Social Security and Medicare, protected Wall Street from business failure and criminal prosecution, and done little or nothing to help labor. But with Romney and Ryan as his opponents, he can define these as progressive positions.

Kevin Drum of Mother Jones pointed out that Paul Ryan has a new Medicare plan which (arguably) is not as bad as last year’s plan. The new plan would call for private insurers and Medicare to submit competitive bids, and for the government to issue vouchers equivalent to the second-lowest bid. People would be covered for the two lowest bids and could pay extra if they wanted premium coverage.

The problem with this, as Drum pointed out, is that this won’t necessarily hold down Medicare costs, since premiums for private insurance have gone up faster than Medicare—even though private employers (presumably) get competitive bids for their employee health insurance plans. What happens if the bids come in higher than what Ryan wants to budget for vouchers? Who pays the difference? The government? Seniors?

SOCIAL SECURITY CLOSER TO INSOLVENCY: Government says trust funds will run dry in 2033.

That was the headline over the lede [1] story this morning in my local newspaper, the Democrat and Chronicle. Stephen Ohlemacher, the Associated Press reporter, began as follows:

Social Security is rushing even faster toward insolvency, driven by retiring baby boomers, a weak economy and politicians’ reluctance to take painful action to fix the huge retirement and disability program.

The trust funds that support Social Security will run dry in 2033—three years earlier than previously projected—the government said Monday.

There was no change in the year that Medicare’s hospital insurance fund is projected to run out of money. It’s still 2024. … …

But then when you get to paragraph six, you learn what “running dry” means.

If the Social Security and Medicare funds ever become exhausted, the nation’s two biggest benefit programs would only collect enough money in payroll taxes to pay partial benefits. Social Security could only cover about 75 percent of benefits, the trustees said in their annual report. Medicare’s giant hospital fund could pay 87 percent of costs.

In other words, Social Security and Medicare will not have run out of money when the funds “run dry”. The two programs will have used up the surplus in the Social Security and Medicare trust funds that were created by increasing payroll taxes during the Reagan administration, in anticipation of the retirement of the Baby Boom generation. There are different ways this could be handled, including a moderate increase in the ceiling for payroll taxes. But Social Security and Medicare will not be broke.

The estimated date that Social Security and Medicare will exhaust their surpluses fluctuates a great deal from year to year, depending on changes in the current state of the economic and forecasts for the future. By some past estimates, these funds should already have been exhausted.

There is a larger issue than the amount of Treasury bonds in the Social Security trust fund. Financial assets are not wealth, whether they be Treasury bonds, corporate stocks or bank savings certificates. They are claims on wealth. The real wealth is the amount of goods and services that are produced in any given year. If the working-age population is not producing enough to support themselves and us retirees as well, that is a problem, no matter what we have in our retirement accounts or the Social Security administration has in its trust fund.

The answer is to somehow get back to a high-wage, full-employment economy, where somebody in their 50s who loses their job is not unemployable. We need both better productivity and a more widely-shared prosperity. If a quarter of the nation’s increase in wealth is flowing to the upper 1 percent of the population, as it is now, there is not much left over for 85-year-old widows who depend on Social Security. And if productivity increases are not keeping up with the increase in the aging population, then there is less to go around. Of course we can improve the demographic balance by increasing the number of working-age immigrants.

Click on Robert Greenstein for a sober statement on the Social Security trustees’ report by the founder and President of the Center on Budget and Policy Priorities.

Click on Paul Van de Waterfor a sober statement on the Medicare trustees’ report by a senior fellow for the Center on Budget and Policy Priorities.